Swiss Pension Fund favors Private Equity

Swiss pension fund worth €10.3bn has decided to switch to an asset class that will allow them to reach its high return targets. Pensionskasse Basel-Stadt (PKBS) didn’t have a great year 2015 and has decided to restructure its allocation and improve its strategy.

With a return of 1.19% on 2015, PKBS has underperformed and missed its 4.6% return goal for the year. Investments and Pensions Europe(IPE)  reports that the pension fund of the public employees of the Swiss city of Basel, is switching its allocation favoring the private equity asset class. It states that the pension fund is to”invest in private equity and senior secured loans, one of two moves it weighed as part of a search for yield in the prevailing low interest rate environment.”.

Reasoning for why include private equity:

  • Risk diversification
  • doing this change in strategy “will enable [the fund] to raise its return expectations across its total portfolio without having to take on “excessive” risks” (IPE)
  • Astounding results,  as also noted by IPE, just in the the “first half of this year, the pension fund has achieved a performance of 1.56% on its investments.” (which is a higher performance than both halves of last year combined.